Strategies to Secure Low-Rate Funding Amid Rising Interest Rates

As of May 11th, 2023, the Bank of England implemented a raise in the Base Rate, bringing it to 4.5%. This adjustment puts interest rates at their highest level since 2008. While there is a sense of cautious optimism regarding the UK economy moving forward, the possibility of further rate increases has not been ruled out. 

Encouragingly, experts predict that the anticipated recession will likely be shorter and less severe than initially projected, with a potential conclusion later this year. Whether your business aims to capitalise on the growth expected after the recession or requires additional cash flow to strengthen its position, Fundur is here to assist you in securing the necessary funds.

The Bank of England’s decision to increase interest rates can have a significant impact on borrowers seeking funding. Higher interest rates can lead to increased borrowing costs, making it more challenging for individuals and businesses to secure affordable loans. However, it is crucial to remember that there are strategies and actions you can take to secure lower-rate funding even in the face of rising interest rates. In this blog, we will explore several steps you can take to mitigate the impact of increasing interest rates and secure funding at a lower rate.

One of the most critical factors influencing the interest rates offered to borrowers is their creditworthiness. Lenders assess creditworthiness based on factors such as credit history, credit score, and debt-to-income ratio. To secure lower rate funding, it is vital to work on improving your creditworthiness. Start by obtaining a copy of your credit report and reviewing it for any errors or discrepancies. Pay off existing debts, make payments on time, and keep credit utilisation low. These efforts will enhance your credit profile, making you a more attractive borrower in the eyes of lenders.

Even with rising interest rates, there are still lenders offering competitive rates. Take the time to shop around and compare offers from different financial institutions. Different lenders may have varying risk appetites, which can result in more favourable terms for borrowers. Explore both traditional banks and alternative lending sources such as credit unions, online lenders, or peer-to-peer lending platforms. Be sure to consider the overall cost of the loan, including fees and charges, to make an informed decision.

When interest rates are rising, it may be advantageous to opt for fixed-rate loans rather than variable-rate loans. A fixed-rate loan ensures that your interest rate remains constant throughout the loan term, protecting you from future rate increases. This stability allows for better budgeting and minimises the risk of facing unaffordable repayment amounts in the future. Consult with your lender to understand the pros and cons of fixed-rate loans and determine if they align with your financial goals and circumstances.

Offering a higher down payment or collateral can help secure lower rate funding. Lenders view borrowers who have invested more of their own funds as less risky, leading to more favourable loan terms. Whether you are applying for a mortgage, business loan, or personal loan, having a larger down payment or valuable collateral can help offset the impact of rising interest rates. Consider saving or reallocating funds to increase your down payment or exploring additional assets you can use as collateral.

Interest rates hedging instruments such as interest rate swaps or caps can provide protection against rising rates. These financial tools allow borrowers to lock in a specific interest rate or limit the potential increase in interest payments. While these instruments may involve additional costs, they can provide peace of mind and help you secure lower rate funding. Consult with a financial advisor or professional to determine if interest rate hedging instruments are suitable for your specific situation.

Maintaining strong relationships with lenders can be advantageous when seeking lower rate funding. If you have a good history with a particular lender, they may be more inclined to offer you competitive rates or negotiate more favourable terms. Stay in regular contact with your lender, provide them with updated financial information, and showcase your commitment to responsible financial management. By fostering these relationships, you increase your chances of securing funding at a lower rate, even in a rising interest rate environment.

In the demolition and scaffolding industry, having access to the right equipment is essential for successful project completion. Construction-specific financing options often include support for equipment financing, enabling businesses to acquire or upgrade their equipment without straining their cash flow. Whether it’s purchasing demolition machinery, scaffolding materials, or specialised tools, financing providers can offer funding solutions tailored specifically for equipment needs. This allows businesses to stay competitive, enhance productivity, and take on larger projects by having the necessary equipment readily available.

While rising interest rates can pose challenges for those seeking funding, there are several proactive steps you can take to secure lower rate funding. By improving your creditworthiness, shopping around for competitive rates, considering fixed-rate loans, increasing down payment or collateral, utilising interest rate hedging instruments, and strengthening relationships with lenders, you can mitigate the impact of rising interest rates on your borrowing costs. 

Remember to assess your individual financial situation and consult with professionals to determine the best strategies for securing affordable funding. With careful planning and informed decision-making, you can navigate the lending landscape and secure funding at favourable rates despite the Bank of England’s interest rate hikes.

As the Bank of England raises interest rates, securing affordable funding for your business becomes increasingly important. At Fundur, we specialize in assisting businesses in obtaining lower rate funding, even in the face of rising interest rates. By leveraging our extensive network, customized financial solutions, and alternative financing options, we position your business for success.

Don’t let rising interest rates hinder your growth and financial stability. Contact Fundur today and let us help you secure the funding you need at the most competitive rates available, ensuring your business remains resilient and primed for long-term success.